Tag: businesses

Inclusion of traders, retailers as MSMEs to improve ease of doing business, BFSI News, ET BFSI

Personal Finance

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By: Gaurav Mohan

The Micro, Small and Medium Enterprises (MSME) sector in India has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades.

It not only plays a crucial role in providing large scale employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas and in reducing regional imbalances, assuring more equitable distribution of national income and wealth.

MSMEs are complementary to large scale industries such as ancillary units and this sector contributes enormously to the socio-economic development of the country.

MSME Act

The Micro; Small and Medium Enterprises Development (MSMED) Act was notified in 2006 by the MSME Ministry to address policy issues affecting MSMEs as well as the coverage and investment ceiling of the sector.

The Minister of MSME and Road Transport had announced the inclusion of Retail and Wholesale traders as Micro, Small and Medium Enterprise (MSMEs). This move by the Government is expected to benefit over 2.5 crore retail and wholesale traders in a positive way..

In 2020, the Government of India had launched Atma Nirbhar Bharat Abhiyan (ABA) and also changed the MSMEs classification by inserting composite criteria of both investment and annual turnover. Also, the distinction between the manufacturing and the services sectors under the MSME definition was removed in year 2020.The following is the current MSMEs classification, where the investment or annual turnover are to be considered for deciding an MSMEs:

 Micro enterprises-where the investment in plant and machinery or equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;

 Small enterprises-where the investment in plant and machinery or equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees; and

 Medium enterprise- where the investment in plant and machinery or equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees

If any enterprise crosses the ceiling limits specified for its present category in either of the two criteria of investment or turnover, it will cease to exist in that category and be placed in the next higher category but no enterprise shall be placed in the lower category unless it goes below the ceiling limits specified for its present category in both the criteria of investment as well as turnover.

Thereby it can be said that wef July 1, 2020 above limits would be equally applicable for every entity in the service sector, so as to establish the eligibility criteria under MSMEs laws.

Inclusion of traders, retailers in MSMEs

Earlier in the year 2017, the Government had removed retail and wholesale traders from the MSMEs category. Thereby the existing definition of MSMEs covers only Manufacturing and Service Sector enterprises. Government of India received many requests and representations to include more services provided by wholesales & retailers under the regime of MSMEs to give support to their businesses, especially during the pandemic crisis.

The Ministry of MSME wide Office Memorandum dated- July 2, 2021 had issued an order to include retail and wholesale trade as MSME. This will enable them to harness the benefit of priority sector lending, and they will now be able to register on the Udyam Registration Portal. To be specific, now from 02.07.2021follwing additional services are being added to this list eligible for MSME:

 Wholesale and retail trade and repairs for services related to motor vehicle and motorcycles

 Wholesale trade except of services related to motor vehicles and motorcycles

 Retail Trade Except of services related to Motor Vehicles and motorcycles

MSME tag benefits

This move to include more services in MSMEs would be of great benefit to wholesalers and retailers, few of which are listed below:

 Benefit from various schemes issued by Government of India in order to help them to access to the funds available and manage the pandemic situation & financials crisis such as:

 Cap of Rs. 500 crores of loan outstanding removed.

 100 % guarantee cover on loans up to Rs. 2 crores.

 ECLGS scheme expansion.

 Benefits of RBI restructuring.

 The Udyam portal is a free, paperless online and instant registration portal for MSME and now retail & wholesale traders can register on it and can become eligible for many more benefits available to MSME Sector like-

 Concessional loan rate by bank.

 Concession in Electricity bills

 Exemption in direct tax & indirect tax laws.

 Various COVID-19 relaxations related to business and taxation.

 To take benefits of Emergency Credit Line Guarantee Scheme (ELCGS), the total budget has now been increased to INR 4.5 lakhs crore by Finance Ministry on June 28, 2021 to provide relief to MSMEs affected by the second wave of COVID-19.

 More than 400 old customs duty exemptions granted this year.

 Nationalised exemptions on import of duty free items as an incentive to exporters of garments, leather & handicraft items. Most of these are manufactured by MSMEs entities.

 Reduced compliance burden and limit increased for tax audits from INR 5 crores to INR 10 crores.

Such benefits would definitely help the registered Wholesale & Retail traders to stand up in the Indian Economy during the COID-19 Pandemic crisis situation & now they will be governed by MSME’s regulations issued by MSME Ministry for MSMEs.

Conclusion

COVID-19 pandemic affected traders will now be able to restore their businesses by obtaining necessary finances from the banks which were earlier denied by the Banks which will boost the Indian Economy in a positive way.

Taking into consideration the situation of COVID-19 in India, MSME Ministry should increase the limit of Annual turnover & Investments so that more service providers can get registered as MSMEs and can get relief with loss in second COVID-19 wave & expected upcoming waves.

About the Author: Gaurav Mohan is CEO at AMRG & Associates.

Disclaimer: The views expressed are solely of the authors and ETCFO.com does not necessarily subscribe to it. ETCFO.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.



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Can’t wrap head around not having U.S. central bank digital currency, BFSI News, ET BFSI

Personal Finance

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Federal Reserve Governor Lael Brainard laid out a range of reasons for “urgency” around the issue of developing a U.S. central bank digital currency, including the fact that other countries such as China are moving ahead with their own.

“The dollar is very dominant in international payments, and if you have the other major jurisdictions in the world with a digital currency, a CBDC (central bank digital currency)offering, and the U.S. doesn’t have one, I just, I can’t wrap my head around that,” Brainard told the Aspen Institute Economic Strategy Group. “That just doesn’t sound like a sustainable future to me.”

Fed officials are taking a deep dive into the digital payments universe, collecting public feedback on the potential costs and benefits as well as design considerations with a view to publishing a discussion paper in early September.

Fed Chair Jerome Powell in comments earlier this month described the analysis as a key step in accelerating the Fed’s efforts to determine if it should issue its own CDBC.

“One of the most compelling use cases is in the international realm, where intermediation chains are opaque and long and costly,” Brainard said on Friday.

But there are domestic reasons too for a U.S.-backed digital currency, she said: the dramatic rise in stable coins, a form of cryptocurrency pegged to a conventional currency such as the U.S. dollar but not backed by any government.

Stable coins could proliferate and fragment the payment system, or one or two could emerge as dominant, she said. Either way, “in a world of stable coins you could imagine that households and businesses, if the migration away from the currency is really very intense, they would simply lose access to a safe government-backed settlement asset, which is of course what currency has always provided.”

A CBDC could also help solve other problems, she suggested, including the difficulty during the pandemic of getting government payments to people without bank accounts, who also tend to be the very people who need the payments the most.



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With advance POS terminals BFSI companies are scaling up merchant’s businesses, BFSI News, ET BFSI

Banking & Finance

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With the proliferation of the point-of-sale (POS) technology, BFSI companies have been adding different layers consistently. The POS terminal has also strengthened the merchant’s business.

How does POS create opportunities for merchants?

POS is the point where retail transactions take place. It is a replacement for a cash register but is more functional. From payments to emailing the customers, from operations management to selling insurance covers, the POS world is burgeoning with opportunities and this means swelling possibilities to optimise the business and earn higher revenues.

Inventory Management

For small businesses where there are only a handful of employees, inventory can be controlled efficiently via POS machines. It can track the best-selling products or services based on the sales. All previous transactions can be looked up through POS and inventory can be tracked and products can be reordered in case of low stock. Before getting a POS system, ensure that it has a separate inventory management software or has the capability to integrate well with yours.

Almost all businesses have an online address apart from the brick and mortar store. POS can even help businesses integrate and streamline the sales from all locations.

Employee Management

Softwares in the POS hardware can even help merchants track the performance of the employees. Individual sales by employees, their checking in and out time, how far they are from their sales targets, a lot can be monitored. This will also help employees to improve their strategies and get to their targets faster.

Customer Relationship

Sending an SMS or an email thanking the customer soon after the purchase can also be set via POS. Customers’ style and previous purchases can be looked into and marketing and advertising can be customised to boost sales. Insights from the customer can help the merchant help them better.

Cloud for managing business data

Every businessman doesn’t ace data analytics and POS saves them from this necessary headache. Reports can be created relating to tax, best selling products and even inventory. Just knowing about your profits or total sales isn’t enough, pointing at what worked and what didn’t is beneficial for long-term success of the business. You need to know what has been lying on the shelves and what has been running out of stock. A cloud-based POS system helps in reaching these data points. Merchants can understand which days are the busiest and which employee is working exceptionally well and crossing targets. These reports won’t only help optimise the payroll but also make other staffing and operational decisions convenient.

Diversifying the revenue source

When a POS terminal is set up in a nearby kirana store or neighbourhood shops, anybody can come and withdraw or deposit cash. Instead of travelling to a distant ATM or a bank branch, one can head there. The merchant can advertise its own store and products on the POS system as well. This will attract eyes and also increase the chances of a sale happening. This is a way to double the revenue sources for small businesses.

Not just cash but even insurance can be sold via these terminals. The mobile POS and mobile payments solution provider, Mswipe offers insurance for two-wheelers. Even Spice Money delivers this product to its users. There’s also the provision of a micro-credit facility for merchants. Spice Money offers it with a ticket size of INR 30,000 to 40,000 via its own POS machines.

Merchants that employ the POS terminals don’t charge the consumer directly for using these services but do have the power to stretch up the prices of their products and services. So, it is a profitable way for businesses to upscale their operations and raise revenues.

Expanding payment options

Different customers prefer contrasting payment modes and not just one. With POS, credit cards, debit cards, mobile wallets, QR codes and even the UPI mode is accepted, thus allowing businesses to cater to all.

A POS system has been strengthening the merchants’ businesses and has a scope for a lot more. From restaurants to salons, the POS market is growing gradually in India. As per the RBI’s vision, the expectation of 5 million PoS terminals by the end of 2021 has already been fulfilled during FY20 with 5.1 million terminals.



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